Greening China’s power brings down cost of renewable energy for all

The drive to adopt clean energy comes from a need to improve air quality in its cities

Chinese tourists wearing face masks visit Tiananmen Square as heavy air pollution shrouds Beijing in February. And in China, said industry analyst Ethan Zindler, a big driver to adopt clean energy comes from a need to clean up air quality in its cities.

Photograph by: MARK RALSTON
, AFP/Getty Images

It is not quite like the fluttering of a butterfly’s wings in Asia causing a hurricane on the West Coast of North America, but the impetus for China to clean up the pollution-choked skylines of cities such as Beijing and Shanghai is making waves in surprising ways on this continent.

China has become the world’s biggest investor in the global trillion-dollar renewable energy market, which has helped pull down the capital cost of producing renewable electricity to the point where it is competitive with existing sources, said industry analyst Ethan Zindler Tuesday.

“Through the ramp up of manufacturing (of wind turbines and solar panels) in China, it has helped reduce the costs of clean energy for everybody,” Zindler, the head analyst for the Americas at Bloomberg New Energy Finance, said to an enthusiastic audience of B.C.’s clean-energy sector in Vancouver.

While total global investment in renewable energy fell to $255 billion US in 2013, down from a peak of $318 billion US in 2011, Zindler noted that Asia, and predominantly China, has become the dominant region.

Asia saw $121 billion US in spending on renewables in 2013, up from $109 billion in 2012 and continuing on a steep growth curve.

And in China, Zindler said, a big driver to adopt clean energy comes from a need to clean up air quality in its cities.

News about very high levels of pollution in China has had a high profile this winter with reports of airports being shut down and the vulnerable being warned to stay indoors due to extremely poor air quality.

In February, the government set aside a $1.65 billion fund aimed at cutting fossil-fuel consumption in its most polluted cities.

“(China) obviously has a political interest in trying to make the quality of life better for citizens,” Zindler said. “(When) you can’t leave your house on an otherwise sunny day, then you have a civil rights issue in your country.”

He added that China is still adding new coal-fired power generation to its grid, but the proportion that it is being brought into the system is shrinking as the proportion of new renewable electricity is rising.

Zindler noted that China, which alone spent $61 billion US to build renewables in 2013 (the U.S. was next at $48 billion and Canada seventh at $7.5 billion), installed more solar and wind power generation than any other country.

As well, it spent $4.2 billion to install 62 million smart meters.

And while much of the cost reduction has come out of overcapacity in China’s manufacturing sector, the result is lower unit prices for electricity.

That was a welcome message for B.C.’s independent power producers, which are fighting to play a bigger role in producing electricity for the province’s yet-to-be-realized liquefied natural gas export industry and for growth in demand on the BC Hydro grid.

“In the terms of the cost of wind (generation) coming down and capacity of wind going up (in China), those are good things to hear,” said Paul Kariya, executive director of Clean Energy B.C., the main lobbying group that represents IPPs in the province.

“Those technologies invariably make their way here,” Kariya added, which will boost the prospects for producers to challenge the assumptions of BC Hydro and policy-makers at the provincial level about where B.C.’s future electricity will come from.

Zindler delivered his presentation at an event hosted by Clean Energy Canada, a group that belongs to the environmental association Tides Canada, and sponsored by the Vancouver Foundation.

Pushing government to require that proponents of B.C. LNG export terminals use renewable electricity to power their plants, rather than natural gas, is one of Tides’ specific campaigns.

Zindler said the consultants at Bloomberg New Energy are not clean-energy advocates, but evaluate renewable energy on strict economic terms for investors and policy-makers who want to make “fiscally responsible” decisions about the path they take with clean energy.

“We’ve entered an interesting period where a number of these technologies are truly cost competitive with their fossil rivals, on an unsubsidized basis,” he said. “It’s not everywhere, by any means, and not everywhere at the same time.”

Zindler added that the “unsubsidized” viability still depends on a lot of associated factors, such as the cost of financing renewable generation and existing electricity prices in particular jurisdictions.

However, for Kariya, the changing dynamics give his industry ammunition in its arguments.

IPPs, which fill about 20 per cent of B.C.’s electricity needs now, have proved controversial in the past, being seen as high-cost options to meet new demand for power generation when there is lots of cheap power available on the open market.

In its integrated resource plan released last Summer, BC Hydro noted that it did not anticipate commissioning any new sources of electricity from IPPs for several years.

“In some respects, we can take the best of what we’ve learned from renewables and marry it to (LNG) and have a transition kind of economy,” Kariya said, and possibly challenge BC Hydro’s assumptions about whether to build the $8-billion Site C Dam megaproject on its Peace River generation system.

Chinese tourists wearing face masks visit Tiananmen Square as heavy air pollution shrouds Beijing in February. And in China, said industry analyst Ethan Zindler, a big driver to adopt clean energy comes from a need to clean up air quality in its cities.

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